Monday, 26 May 2014

Can a Lien Include Damages Due to Delay?

In Krupp Canada Inc v. JV Driver Projects Inc, 2014 ABQB 259,
Master Robertson addressed the question whether damage claims – in
particular delay claims - can be included in builders’ liens. The issue
has been considered by the Alberta courts before, but Master Robertson
contributed to the jurisprudence with a thorough review of the
authorities and a considered discussion.

Krupp was applying to
court to reduce the amount of a claim of lien by JV Driver –
specifically, disputing that damages for delay were properly included in
the lien. Krupp thereby sought to reduce the security that Krupp had
previously paid into court to have the lien discharged. After
extensively reviewing the case law on the issues, the Master summarized
the law as follows:

Where the lienholder has done work on
or in respect of an improvement, or furnished material to be used in or
in respect of an improvement, then that person has a lien for so much as
”remains due to him”, either pursuant to an agreed price or on a
quantum meruit basis;

If the amount the lienholder claims
remains due is for damages in tort, or for breach of contract but not
relating to work actually done on or in respect of the improvement (or,
in the case of materials, materials that were used in or in respect of
the improvement), then there may be a damages claim, but it is not
properly part of a lien; and

If it is not clear whether the
claim is properly the subject of a lien, then on the standard used for
summary judgment applications the amount to be posted as security should
be the higher amount and the issue left to the trial court or, perhaps,
to a later application before trial once further facts have been
learned in the questioning process.

The Master
declined to reduce the lien amount as it related to damages for delay.
In essence, paraphrasing point 2 above, the Master concluded that a
damage claim (including a delay claim) can legitimately form part of a
claim of lien, provided the claim is “relating to work actually done on
or in respect of the improvement (or, in the case of materials,
materials that were used in or in respect of the improvement).” The
question is whether the damages claimed relate directly to the work that
is the subject of the lien. The Master gives an example; a claim for
lost productivity or delay is a legitimate lien claim if the lost
productivity or delay occurred on the project that is liened; on the
other hand, a claim for damages for a contractor’s inability to do work
elsewhere, or for inability to do the work for which it was contracted,
would not support a claim of lien.

As JV Driver
was claiming various damages (not just damages due to delay), the court
also considered the burden of proof on such an application. Master
Robertson concluded (as indicated in point 3 above) that the party
seeking to discharge or reduce a lien claim has to satisfy the court
“that there is no genuine issue of material fact requiring a trial.” If
there is any doubt on the issue, the court will decline to reduce the
lien claim (and the security paid into court) until the question can be
resolved at trial – whether the lien claim is disputed on the basis that
the damages are not properly the subject of a claim of lien, or on any
other basis. To the extent that the Master was unsure whether all of the
damages claimed by JV Driver did or did not relate directly to the
work, the doubt was resolved in favour of the lien claimant, JV Driver.

This
is a favourable decision for lien claimants; in simple terms, the court
confirmed that delay claims (and other damage claims) can be included
in builders’ liens, and the court resolved that a lien claimants’
security will not be reduced before trial unless there is “no genuine
issue” to be tried.

Disclaimer

All posts made to this blog are a general overview of the subject matter and cannot be regarded as legal advice.Please contact Corbin Devlin or any member of our Construction Industry Group for advice on this or any other construction related topic.